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Stripe Capital

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Re: Stripe Capital

#141

Post by notyourday »

mkagenius wrote: post #85
harshadante wrote: post #46

Earlier quoted context omitted.

Harsha from the Stripe Capital team here. We’ve designed the program so that most offers take about 8-12 months to pay back, and therefore the repayment rate would change to reflect that projected duration (which would ultimately impact the APR). The 15% repayment rate you see on the landing page is just an example. We do think this is a significantly improved overall user experience—it works straight out of your Str…

> about 8-12 months to pay back Wow, that's a whopping 10-15% p.a. interest rate. Time to mint the money has come for Stripe, yeah?

For a mom & pop store without a personal guarantee 10-15% is an excellent rate. If there's a personal guarantee attached then 10-15% is a terrible rate.

Re: Stripe Capital

#142

Post by cm2012 »

Meekro wrote: post #112

My company was auto-enrolled in the Stripe Capital beta some weeks/months ago (not sure when). I never accepted the money. Here's what they offered: $12,500 advance; $1,250 fixed fee; 3.8% of sales towards repayment. $18,500 advance; $1,850 fixed fee; 5.6% of sales towards repayment. $25,000 advance; $2,500 fixed fee; 7.6% of sales towards repayment. My company grossed $45,600 MRR this August. I love Stripe and swear…

Typical business loans are usually capped at around 10% of annual revenue.

Re: Stripe Capital

#143

Post by ceejayoz »

whatshisface wrote: post #92
eloff wrote: post #84

Earlier quoted context omitted.

But religion, unlike laws, thrives on technicalities. Some Jews won't push a button in an elevator on the Sabbath, but it's fine if its programmed to stop at every floor.

https://www.kosherswitch.com/live/tech/how

These approaches are so baffling to me. Their tagline is even "control electricity on Shabbat!" while telling you all the ways you're technically not controlling electricity.

Loopholes that violate the spirit of the law but technically fit the letter of it make sense in doing your taxes, but it seems extremely risky to take that approach with a god. "Haha guys, very clever, you got me" doesn't seem like the end result for a being known for smiting.

Re: Stripe Capital

#144

Post by clairity »

unilynx wrote: post #140
ksec wrote: post #137

Earlier quoted context omitted.

Is there a similar term for Cash Receivables not from Credit / Debit Card but from Business to Business 30 Days credit?

Factoring ? https://en.wikipedia.org/wiki/Factoring_(finance)

factoring comes in different flavors too. for instance, you can flat-out sell future aaccounts receivables (at a discount, so it has an imputed interest rate), or you can use it as collateral for a loan (with an explicit interest rate).

Re: Stripe Capital

#145

Post by perspective1 »

Wow. This is amazingly innovative and scary. The "flexible" mechanism could unwittingly lead to very high APRs. That they get the money before it gets deposited to your bank account (and used for other expenses or withdrawn prior to bankruptcy) and the application is instant-- wow.

In two years or less, Chase and other innovative banks will be hitting Stripe APIs and emulating this. But they will never match the ease exactly and they will never have first dibs on the revenue.

Re: Stripe Capital

#146

Post by cm2012 »

I worked in SMB finance for four years. Here's the big players:

1) OnDeck (Now a public company)

2) Kabbage

3) Square (For their own customers only)

4) Paypal (For their own customers only)

Stripe is obviously following the Square/Paypal model which already own the customer - life is tough for OnDeck and Kabbage since the default rate for standard SMBs is so high and competition is so fierce for them across marketing channels.

Re: Stripe Capital

#147

Post by theptip »

mkagenius wrote: post #85
harshadante wrote: post #46

Earlier quoted context omitted.

Harsha from the Stripe Capital team here. We’ve designed the program so that most offers take about 8-12 months to pay back, and therefore the repayment rate would change to reflect that projected duration (which would ultimately impact the APR). The 15% repayment rate you see on the landing page is just an example. We do think this is a significantly improved overall user experience—it works straight out of your Str…

> about 8-12 months to pay back Wow, that's a whopping 10-15% p.a. interest rate. Time to mint the money has come for Stripe, yeah?

It's worth mentioning that many small businesses can't get SMB loans that cheap (if at all), and can also earn a higher return on each dollar reinvested in their business.

In the early stages of an internet-enabled, distribution-bound company, 1 dollar reinvested (say in ad spend) can net you 1.5-2 dollars in increased sales. So even at a quite high APR, it's still a net win for many companies to take that debt on.

Obviously you'd rather take on debt at a lower APR, but if your risk of default is high, nobody is going to give you a low APR.

Re: Stripe Capital

#148

Post by toasterlovin »

ksec wrote: post #137
uerobert wrote: post #105

Earlier quoted context omitted.

This is what is known as Merchant Cash Advance (MCA) https://en.wikipedia.org/wiki/Merchant_cash_advance , nearly every business with at least $20k credit/debit card sales a year has access to through their payment processor, bank, or companies that specialize in that sort of arrangement, of which there are tons. It is not a loan, what you are doing is basically selling your future card sales at a discount.

Is there a similar term for Cash Receivables not from Credit / Debit Card but from Business to Business 30 Days credit?

Asset Based Lending is the blanket term for borrowing against receivables and/or inventory: https://en.wikipedia.org/wiki/Asset-based_lending

Re: Stripe Capital

#149

Post by juliusmusseau »

pc wrote: post #59
jawns wrote: post #25

The way Stripe Capital has structured repayment of the loan -- fixed fee, dynamic loan term -- is is an interesting way to make it hard to compare against other lenders, which typical express their fees through APRs. The term of the loan is variable, and depends on daily sales, but assuming you have a high volume of sales and take out a small loan, the effective APR is going to be through the roof! For instance, supp…

[Stripe cofounder.] > But one thing strikes me as odd about this whole arrangement. The better a business performs, the quicker it is able to repay the loan, and the higher its effective APR becomes! It's essentially a prepayment penalty in disguise. So you'd better make sure the loan doesn't help your business too much, or you'll end up getting hosed by the loan fee. Yes, this is right -- if your business suddenly s…

Very neat idea.

But I worry that it's vulnerable to bad people.

Got a hefty personal bill coming up, and you're pretty confident your SaaS business will be dead within 6 months but Stripe has no way of knowing based on current numbers?

Thinking of getting a divorce (startup or marital)... maybe time to grab the largest advance possible before your soon-to-be ex(-co-founder) realises?

The problem is that even if only 1% of Stripe's customers might match these kinds of profiles, that same 1% might be taking 20% of the Stripe Capital advances.

Re: Stripe Capital

#150

Post by owens99 »

kryogen1c wrote: post #109
pc wrote: post #59

Earlier quoted context omitted.

[Stripe cofounder.] > But one thing strikes me as odd about this whole arrangement. The better a business performs, the quicker it is able to repay the loan, and the higher its effective APR becomes! It's essentially a prepayment penalty in disguise. So you'd better make sure the loan doesn't help your business too much, or you'll end up getting hosed by the loan fee. Yes, this is right -- if your business suddenly s…

Just popping in to say this is one of the most impressive C-level replies i have ever seen. Straight acknowledgement of the criticism from OP, but explains the reasoning and demonstrates the benefit to both customer and stripe. Closes with willingness to change if business model doesnt produce results matched by test market. Doesnt read as defensive or marketing buzzwordy, just straightforward and simple. I hope to o…

It’s a solid response. Not sure if it’s worth pointing out but you are totally fan boying PC and making his response out to be way more than it is.
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